I’ve stayed out of the discussion of Congresswoman Laura Richardson, who abandoned her half-million dollar second home to foreclosure so she could use her tax-free state legislative per-diem to fund her congressional campaign rather than her mortgage….

First you say it isn’t for corporate debt, then you say it is, then (naturally) you call me an idiot

– lgm

A try at deflection lgm? That’s so. . .YOU, you know?

I said it’s a tool for ANALYZING debt of other companies, which it is, whereas you claimed it’s used by companies to decide when to default on a debt, which it isn’t.

And in another complete misrepresentation, you say I called you an idiot, which I didn’t. It’s entirely possible I was thinking it, but I didn’t type it.

On May 22nd, 2008 at 11:14 am, lgm said:

The Merton model assumes that a company defaults when it’s total worth to the owners becomes negative. It doesn’t tell anyone to do this.

Nice try, lgm. You clearly implied that the Merton model was a “strategy.”

But, if you are now willing to admit that it’s not a strategy, then why were you deliberately misleading with your first post?

Your logic was; i) the Merton model does X for corporations, ii) if ordinary people use the model, then they would default, iii) we are holding ordinary people to a higher standard than corporations.

So, I assume that you are willing to retract your statement that ordinary people “would default” if they were to use this model.

Disgustingly misleading, lgm.

Just because the model is related to debt doesn’t mean that it determines when a company should deliberately default.

The Merton model assumes that a company defaults when it’s total worth to the owners becomes negative. It doesn’t tell anyone to do this. People throughout the finance industry use this model to put a price on the risk that a company will default on bond payments. The Merton model also is a component of models that estimate loss distributions for CMOs (mortgage debt) and assume a similar behavior from individual mortgage holders.

Just because the model is related to debt doesn’t mean that it determines when a company should deliberately default.

The other commenters provided perfectly accurate information. YOU did not.

On May 21st, 2008 at 4:18 pm, Nugai said:

I’d like to receive monetary compensation for my bad choices, too. Where exactly do I sign up?

Do like I did – write your congresscritters. Last year when a story about how good the “detainees” at Gitmo were being treated I wrote to my congress woman and two worthless sentators asking how could I get into Gitmo, because they had it better than I did, being retired and all.
I got a survey back from my congress woman, a form letter from one senator and nothing from the other one.
You might have better luck than I did.

“Auction” would likely indicate “bank auction” after foreclosure or “turning it back” to the bank.

Funny how she is denying it all. Pelosi’s got plenty of millions, she can probably bail her out to make it all go away.

Except Merton’s model is not to evaluate risk in a corporate debt. You totally misrepresent what Merton’s model is used for.

It is also known as the Asset Value Model. It is primarily used by brokers and analysts to evaluate a company’s ability to service its debts,

First you say it isn’t for corporate debt, then you say it is, then (naturally) you call me an idiot.